Interview: On Writing “The New Mobile Display Ecosystem”

MobileDisplayThe New Mobile Display Ecosystem, an Econsultancy report published in association with OpenX, surveyed over 20 leaders in mobile marketing, publishing, and technology to find out the latest trends in mobile advertising, and what the future might hold. Chris O’Hara, the report’s author, answers some of our questions about the research.

So, is 2014 finally the “year of mobile?”

Well, this “year of mobile” has been coming for some time, but our survey panelists are starting to feel that mobile has finally emerged as a player on the overall advertising scene. There are still huge discrepancies between time spent on mobile devices (a lot) and ad spending in the sector (relatively small). According to some research, people spend more than 20% of their time on mobile devices, but ad spending is at 4%. That’s a multiple-billion dollar opportunity.

What is keeping mobile ad spend from growing?

Our research showed that a large issue for advertisers was mobile creative—specifically, the lack thereof. The units are mostly small and prone to “fat thumb” clicks in browsers, and most of the in-app ads were fairly plain “install ads.” Not great for brand building or telling a story. Also, it is still somewhat difficult to get to scale without a “mobile cookie,” or persistent ID. That’s changing now, but without having statistical identification available at scale across many systems, only the large players like Google and Apple can effectively identify users across devices. That’s a challenge.

Who is most impacted by the growth in smartphones in the ad ecosystem?

For me, the retailers and product folks have it the worst. Soon enough, smartphones will reach 50% penetration. That means every other person will have the combined knowledge of the entire world right at their fingertips. What that means for retailers is what Google is starting to call the “Zero Moment of Truth,” an adaptation of an old P&G saying. What it means is that, when a consumer is standing in front of a product with their smartphone, they can find out every single thing—good and bad—about a product that’s ever been written with the click of a button. And, of course, the right price to pay. That’s an incredible dynamic.

What’s the most shocking thing you learned while researching the report?

44% of Fortune 100 companies don’t have a mobile-enabled website. That’s pretty scary, considering the “Zero Moment” dynamic, but it’s also a huge opportunity.

You asked panelists what “Mobile First” really means. What did they say?

Everyone agreed that both marketers and publishers have to start with mobile, because that is where people are spending their time. You can’t ignore mobile, or just make an HTML5 site and call it a day. If you are building a new website, launching a new product, you must do that with a “mobile first” approach, and try to leverage the unique touchpoints the channel offers to consumers. That’s the obvious part. I was pretty surprised to see how passionate people were about the idea of “mobile first.” Many think mobile is the biggest single opportunity out there for business. Suffice it to say, it is ignored at your peril.

What about the creative problem? How are marketers taking advantage of the unique data and form factors at play in mobile?

Native is certainly a big focus. The IAB has identified about 6 different categories of native advertising, many of which apply to mobile devices. OpenX has recently launched a new mobile exchange for accessing native mobile units programmatically. Native units tend to leverage more of the mobile form factor, which is great. Marketers are still struggling to take advantage of all the great data that can be used (altitude, motion, facial recognition, biological data, activity, etc), but some really cool executions are starting to be deployed. We are essentially ready for our Tom Cruise “Minority Report” moment from 2002, with ads that can follow us around and talk to us personally based on our situation.

What are the biggest threats?

Although everyone I talked to loves their “triple play” deal, and Apple or Android phone, nobody wants telecoms or big technology companies to be the only ones with cross-device targeting capability. All thr panelists were interested in a more diverse ecosystem, more akin to display advertising, where the “cookie” (albeit controversial) has enabled real audience targeting at scale. Marketers need to tell a sequential story, as the consumer moves from device to device. That’s only possible when you can link users to all of their devices, and that’s hard to do now unless you are Verizon.

Any final thoughts?

I think video is the way we are going to see mobile eat into established marketing budgets. The ads play amazingly well on new larger-screen phones and HD tablets. There are great creatives already established (the 10, 55, and 30 second spot ad), and you can actually tell stories with video, which is what marketers want to do. Videos are also the ultimate “native” ad. Video is where the action is right now, but other native formats suited to mobile form factors will follow.

This originally appeared on the Econsultancy blog on 8/5/14]

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Ad Tech’s Walking Dead Startups (DigiDay Interview)

Chris O’Hara is svp of marketing and sales for Traffiq, a digital media optimization company. He has referred to the clutch of ad tech companies with sizable bank accounts from VC investment, not profits, as the walking dead. O’Hara believes that it’s only a matter of time before a massive fire sale begins in the industry.

Explain the idea of a walking-dead company?

Walking dead companies are venture-funded companies that are sort of stumbling along revenue wise, making enough money to stay afloat or surviving on their financing by having a relatively low burn rate. They’re not going to have a super successful exit anytime in the future. They may be very exciting, innovative companies, but they have a hard time getting VCs pumped up. Venture funds tend to place a lot of bets and hope that they get big wins from a small percentage of them. Like any investment vehicle, a VC’s portfolio has its mix of winners and losers, although the typical VC portfolio tends to be less diversified in terms of its industry focus. When I heard Jon Soberg of Blumberg Capital — it is a backer of Legolas, HootSuite, and DoubleVerify, among others — use the phrase “the walking dead,” it felt extremely appropriate. A lot of companies in the digital display landscape are running out of capital after 3 or 4 years and several rounds of financing—and most of them will exit at low or zero multiple of valuation. Then again, smart investors like Grotech Ventures find a Living Social to invest in every now and again, and that is the kind of deal that can propel the value of an entire portfolio.

 

Are VCs beginning to cool in regards to investing in ad tech and social, in light of the economy?

On the contrary. I think the valuations of LinkedIn, Facebook, and Living Social have the VC community excited, maybe even overexcited, to be honest. The recent Buddy Media announcement is just one example, raising $54 million to plump its valuation to $500 million, and there are sure to more such valuations coming soon. I think what VCs aren’t too excited amount is the amount of companies within the display landscape that are going to flame out, or exit at fire sale prices. Unfortunately, according to Luma Partners banker Terence Kawaja, over half of the 35 deals in the last year didn’t produce a return on capital, and he expects that number to increase over time.

 

What are VCs doing right, or wrong, in ad tech?

If their funds make a decent return on investment, then they aren’t doing anything wrong! It may seem like that to company insiders working for some of the less fortunate companies, but VCs are not in business to keep ad-tech executives in panel discussions at cocktail-soaked industry conferences. They are in business to build companies to sell them, or put them into a public offering. I think certain well-heeled VCs may be making the venture capital business a lot harder by over-inflating the valuations of some of the larger companies in our business, but I think that’s due to the flight of money from increasingly unstable capital markets to other investment vehicles. There is a lot of cash on the sidelines right now, and venture funds are starting to look like a surprisingly safe haven. While that should scare the average investor, it makes for a very fun, frothy environment for ad technology!

 

So how should an investor, in this market, value a Demand Side Platform (DSP) company?

I would give them a 1x-3x valuation, similar to a successful digital media agency — and only if they were showing strong profitability and something unique about their process which was repeatable. The problem with the current landscape is that the excitement has been driven in large part by many of the companies that I have just described — companies with more hype than real technology with a unique IP.

 

What should ad tech Investors look out for?

I think investors have to watch out for a rapidly collapsing landscape, due to the social factor. You have an entire ecosystem built around audience targeting using 3rd party data. The problem? The companies with better and deeper first-party data have a lot more audience — like 750 million profiles for Facebook alone — than all of the companies in our landscape put together. And Facebook, LinkedIn, and Google have just started to define their display advertising strategy. If audience targeting is as easy as it seems to be now, via Facebook, then what is the real value of many of those little logos in the Kawaja map?

 

[This interview was originally published in Digiday on 8/25/11]